January 31, 2014 / 12:41 PM / in 4 years

UPDATE 1-ECB's Lautenschlaeger calls for swift agreement on winding up banks

(Recasts with detail on bank resolution, adds background)

BRUSSELS, Jan 31 (Reuters) - Sabine Lautenschlaeger, an ECB policymaker in the running to become the No. 2 at the new European banking watchdog, urged EU negotiators to agree swiftly on a shared mechanism for closing down insolvent banks.

Lautenschlaeger said all banks under the direct or indirect watch of the ECB’s Single Supervisory Mechanism (SSM) should fall under the joint resolution mechanism.

She also said public backstops should be in place by the time the ECB starts supervising euro zone banks from November, to ensure that possible fallouts from the preceding bank balance sheet review can be handled in an orderly way.

“A European supervisory structure needs a European restructuring and resolution regime,” Lautenschlaeger said in written responses to questions from members of the European parliament, where she is due to attend a hearing Monday.

EU countries and the bloc’s parliament are attempting to seal final agreement on a scheme to tackle failed banks within the coming weeks. Time is running out with the parliament due to disband shortly before elections in May.

“The remaining gaps have to be closed soon for the banking union to operate effectively,” Lautenschlaeger said, calling for the single resolution mechanism regulation to be adopted by the end of April when the current legislative cycle finishes.

Lautenschlaeger was in charge of banking supervision at Germany’s Bundesbank before she joined the European Central Bank this week as an executive board member.

She also said the that if possible the period of ten years for moving towards a single resolution fund should be shortened, echoing similar comments from her ECB colleague Benoit Coeure.

A senior lawmaker in Chancellor Angela Merkel’s coalition partner said as much on Friday, wanting the euro zone to move faster in setting up a common fund to tackle failing banks. (Reporting by Tom Koerkemeier and John O‘Donnell in Brussels, writing by Eva Taylor and Sakari Suoninen in Frankfurt; Editing by Ruth Pitchford)

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